May 1, 2006

The car service, Shirlington Limousine and Transportation Service, won a $21.2 million contract from the Department of Homeland Security in 2005, said Larry Orluskie, a Homeland Security spokesman. It was a contract for small businesses, and Shirlington Limousine was one of three companies that competed for it, Mr. Orluskie said.

Shirlington Limousine’s contract is for one year, with an option to renew for four years, he said. The company provides about 10 shuttles for department employees and about 10 sedans to drive senior executives. Michael Chertoff, the homeland security secretary, and his deputy do not use the service, Mr. Orluskie said.

I’ve been reading through the procurement-related documents for this contract tonight. The set of documents put forward in the course of awarding the contract can be found here, and the notice of the award is here. This document is especially detailed. One thing that is unclear from all of the reportage as well as the documents is whether the $21.2 million is only for the base year, or whether it also includes the projected payments in the four option years. Based on my assessment of the project requirements, it’s probably for the five year total – otherwise, this makes highway robbery seem like a charitable profession.

Even assuming that it for five years, it’s still a lot of money. The bid documents break out the estimated number of contractor labor hours and benchmark labor rates (including benefits), which when you plug in the numbers and add the employer FICA & Medicare contributions, implies a per-year labor cost of $657k to meet the contract requirements:

The contract also requires the purchase and maintenance of ten shuttle buses. There is limited information online about prices for the models that are indicated in the procurement documents (National Bus Sales and Leasing Model GC1#0853, El Dorado Model 220, and Thomas Built Model 124), but this link shows 2004 model El Dorado 220′s being sold for $27,500. I’ll estimate a purchase cost of $75,000 per vehicle (w. five-year straight line depreciation to zero), annual maintenance costs of $15,000 each over the five year period, and gasoline costs of $11,250/vehicle per year (15 gallons per day x 250 workdays x $3/gallon). That leads to an implied fleet cost of $412,500 per year over the five-year period.

The procurement is also for executive sedan service, but only for drivers, and explicitly not for the vehicles or gasoline. The drivers’ salaries come out of the totals above, as far as I can tell.

Bottom line: this contract should have operational costs in the neighborhood of $1.07 million per year. Add in another 25% for overhead (e.g. employee background checks, insurance) and project management, and another 15% for profit, and we’re still only talking about $1.5 million – much, much less than the implied annual contract value of $4.2 million.

There could be other factors that I’m not considering, or I could be interpreting this incorrectly, but if so, that’s due to opacity and ambiguity in the contracting documents. DHS should provide a full public accounting of this contract to ensure that the taxpayers’ money is being spent appropriately.

The contract price is $4 million per year with a slight increase for inflation over the term of the five year contract. The vehicles are required to be new when used and expected to be fully depreciated during the term of the contract. This looks like a pretty sweet deal, but the extent of the services is a little hard to make out. It isn’t obvious to me that ten vehicles implies only ten sets of drivers for the shuttle buses in particular. It may be that there are twenty or thirty sets of drivers for the ten shuttled buses.

[...] The FY 2007 appropriations bill for the Department of Homeland Security, H.R. 5441, passed the full House yesterday by a 389-9 vote. The full sequence of votes on amendments to the final bill can be found here. Reuters covers the final passage of the bill in this story, highlighting a motion to recommit that would have increased grant funds to cities by $750 million which failed on a 207-191 vote . The final bill also included an amendment that withholds funds for DHS’s shuttle service contract with Shirlington Limousine Co. [...]

[...] The House Homeland Security Committee held a hearing today on DHS’s shuttle service contract with Shirlington Limousine Co., a deal that has raised suspicions based upon the contractor’s ties to the so-called “Hookergate” scandal (involving convicted ex-Congressman Duke Cunningham), and that I thought was overpriced based upon an analysis of the terms of the proposal. The prepared testimony from the hearing is available here, and summary coverage of the hearing is available in an AP story and two posts at TPM Muckraker. [...]